Introduction: Today, more than ever, the role of investor-state mediation cannot be appraised without regard to the mounting concerns against investor-state arbitration. Investment treaties typically protect nationals of one Contracting Party (natural persons or corporations) when realizing investments in the other Contracting Party State. The most common form of such treaties is the bilateral investment treaty (BIT). As of today, more than 2,800 BITs have been concluded, 2,100 of which are in force. To these treaties one may add regional free trade agreements that include investment chapters or regional investment treaties. One of the many examples is Chapter 11 of the North American Free Trade Agreement (NAFTA) that covers investments. All of these treaties provide for substantive rights and protections such as the prohibition against uncompensated expropriation and various non-discriminatory standards. However, investment treaties have [*226] attained their present recognition due to their dispute settlement provisions and particularly the investor-state arbitration clause almost mechanically inserted in the majority of such treaties. This arbitration clause enables investors to directly sue the host state for breaches of the investment treaty in an international arbitral tribunal typically comprised of three members. Investor-state arbitrations are either ad hoc or institutional, with the most well regarded institutional body being the International Centre for the Settlement of Investment Disputes (ICSID) established by the Washington 1965 Convention.

Over the past three decades, investor-state arbitration proliferated with ICSID registering fifty cases per year and administering more than two hundred at any given time. The most frequent respondent states are Argentina (more than fifty cases), Venezuela, Czech Republic, Egypt, Canada, Mexico, Ecuador, India, Ukraine, Poland, and the United States. The increasing use of investor-state arbitration has also been met with opposition and a widespread consensus for the need of reform. Over the past few years, Bolivia, Ecuador and Venezuela withdrew from the ICSID Convention and terminated a considerable number of BITs. More recently, South Africa and Indonesia have also filed notices to [*227] terminate BITs.

The opposition towards investor-state arbitration stems, in many regards, from the characteristics of such contemporary dispute settlement procedures. In a nutshell, a significant number of investment arbitration cases involve investment in public service sectors and public utilities; investment claims arising out of emergency economic measures or civil unrest; and cases that revolve around issues of public health, environmental regulation, and human rights, in general. Moreover, investor-state cases often involve allegations of state misconduct and corruption, are costly dispute settlement procedures, and the payment of compensation in connection with any arising arbitration awards is borne by the taxpayers of the host state. All these factors are to the interest of the local population as the objectives of foreign investors, governments, and local populations are oftentimes conflicting. Investor-state arbitration has also been criticized for enabling the so-called "regulatory chill", which is a hesitancy to implement a higher degree of regulation in fear of investment arbitration claims. [*228] As later discussed in this article, another source of concern for investor-state arbitration is the lack of transparency in such transnational proceedings. Finally, another concern that is frequently raised is the use of investor-state arbitration to circumvent national courts and the perceived bias of arbitrators, that act both as counsel and as arbitrator in related proceedings.

The above concerns have influenced the drafting of contemporary investment treaties and have also led to initiatives seeking to reform some of the perceived deficiencies of international investment law. The most notable of such initiatives is the rise of transparency discussed in Part IV of this article. Suffice however to say, that it should not be hard to see that greater transparency in investor-state arbitration is aimed at alleviating some of the concerns referred to above. Investor-state mediation is nevertheless a pre-arbitration dispute resolution method that, if successful, eliminates the need to pursue investor-state arbitration. However, as we will see, mediation in general and investor-state mediation in particular, is highly confidential. Would this then mean that investor-state mediation may be used in order to circumvent national courts without the need to adhere to the increasing standards of transparency and other public concerns that are sought to be addressed when it comes to investor-state arbitration? In other words, if the concerns raised with regard to investor-state arbitration have merit, why shouldn't they be applicable with respect to any investor-state dispute settlement proceeding? In addition to these questions, one should also take into account that the United Nations Commission on International Trade Law (UNCITRAL) is considering a multilateral convention on the enforcement of mediated settlements. If this treaty were to be concluded, would it mean that investor-state mediation would not only be a convenient method to avoid [*229] the high levels of transparency now paradigmatic to investor-state arbitration, but would also enjoy high levels of international enforceability?

For now, these arguably legitimate concerns may be kept as a working hypothesis, or an issue to be determined after the apposition of three tenets. The first is the role of negotiation and pre-arbitration consultations in international investment law discussed in Part II of this article. With respect to this tenet, this article shows that investment treaties usually provide for negotiation and pre-arbitration consultation periods as a means to promote the amicable resolution of disputes between investors and host states. Given however that investor-state mediation is a distinct dispute resolution method, an examination of negotiation and pre-arbitration consultation periods is required in order to more fully detail the role and potential use of investor-state mediation. The second tenet is dealt with in Part II that focuses on the development and evolution of investor-state mediation as a distinct pre-arbitration dispute resolution procedure. Specific weight is given to two recent developments, the adoption by the International Bar Association (IBA) of a distinct set of rules for investor-state mediation that took place in 2012, and the appearance of distinct investor-state mediation provisions in recent investment treaties. Finally, the third tenet is the rise of transparency in investor-state arbitration that is discussed in Part III. In particular, this part lays out the main characteristics of the UNCITRAL Rule on Transparency and of the Mauritius Convention on Transparency in investor-state arbitration. With these three tenets in place, Part V, analyzes the implications of transparency in international investment law to the future role and importance of investor-state mediation.